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September 28, 2010

U.S. Courts Should be Reserved for U.S. Cases

To most people, the notion that a country’s legal system should only decide cases regarding actions occurring in that country is common sense. After all, when an American tourist visiting Great Britain gets in trouble with the law, their case is handled by British courts, not American courts. Conversely, when a British tourist gets in trouble in the U.S., their case is handled by U.S, not British, courts.

The Supreme Court apparently agreed with this principle when it recently ruled that the same standard should apply in securities litigation. In the case of Morrison vs. National Australia Bank, the court ruled that lawsuits against foreign companies regarding activity on foreign stock exchanges should not be allowed in U.S. courts. In its ruling, the court highlighted the longstanding principle of American law “that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.”

Despite the seemingly common sense nature of the ruling, securities plaintiffs’ lawyers are outraged. They have already filed scores of frivolous securities lawsuits against U.S. companies and were hoping to bring similarly costly lawsuits against foreign companies in U.S. courts.

Their efforts cannot be allowed to succeed. Permitting foreign securities lawsuits in U.S. courts would discourage foreign investment and further damage the U.S.’s already poor global reputation for excessive litigation. It might also lead to other countries allowing lawsuits in their courts regarding activity by U.S. companies in the U.S.

Congress and the public should ignore the self-serving outrage of the plaintiffs’ bar. The Supreme Court ruling was consistent with U.S. legal principles and common sense. Lawsuits regarding foreign activity should be heard in foreign, not U.S., courts.

For more information, visit Lawsuits Go Global.

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